Managing Taxes for Multi-State Companies

One of the biggest challenges for multi-state organizations is the integration and management of the differing areas of tax nexus…

Multi-state companies are corporations that have business operations in several different states across the United States. These companies are subject to both federal and state-level taxation and payroll-related requirements – in other words, they must comply with not only the governing federal laws, but also with the legislation applicable in the different states they have subsidiaries in, making a harmonized payroll and tax calculation system absolutely essential.

One of the biggest challenges in terms of payroll and taxing encountered by multi-state organizations is the integration and management of the differing areas of tax nexus. The systems these companies use must be prepared to handle the differences in terms of reporting deadlines imposed by the law in different states and they must be able to calculate the tax withheld from the employee’s wages in a correct manner, compliant with local laws.

Some corporations are faced with special situations when they decide to establish a new subsidiary in a state different from the state where the company was originally incorporated, but with the help of employees delegated from the state the company was founded in. In this case, the difficulty arises from the fact that such an employee will be the resident of one state, but he or she will receive payment in another state. And this is only one possibility. Think of bordering states, like New York and New Jersey, where resident of one state frequently work in the other.

The solution to all these problems is a complex and integrated tax management system, managed by key employees who keep abreast all the changes in tax and payroll-related legislation. Without these two factors, multi-state operations become even more complicated and more difficult to handle and manage. Such ineffectiveness will over time translate into lower profits as well.

Want more information on managing taxes and payroll for mulit-state employers? Contact us today.

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